Why TripAdvisor Stock Popped Today

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What happened

Shares of online travel company TripAdvisor (NASDAQ: TRIP) jumped on Tuesday on no company-specific news. A strong day for the Nasdaq index may be the driving force behind this move, although the stock could also simply be bouncing back from a steep post-earnings decline earlier this month. TripAdvisor stock was up about 5% at 11:45 a.m. EST.

So what

TripAdvisor stock has been trending downward since peaking in mid-2014 at about $110 per share. Even after today’s jump, shares trade for just $32. A dramatic slowdown in revenue growth and slumping profits led investors to cool on the once-hot stock.

The TripAdvisor logo.

Image source: TripAdvisor.

TripAdvisor stock took a dive earlier this month when the company reported mixed third-quarter results. Revenue grew by just 4.3% year over year, missing analyst estimates, while earnings per share beat by a penny. The company suffered a decline in hotel revenue that dragged down its results.

Today’s rally might be driven by investors betting that the stock fell too far too fast following the company’s report. With no news, it’s impossible to say for sure.

Now what

TripAdvisor needs to turn around its hotel business as quickly as possible. CFO Ernst Teunissen admitted in the company’s earnings press release that “reigniting near-term hotel growth has been more difficult than expected.” Non-hotel growth was robust, but the hotel business is still the core of the company.

If TripAdvisor can’t turn around its core business soon, the multiyear downtrend in the stock price may not be over.

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Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends TripAdvisor. The Motley Fool has a disclosure policy.

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